In the first minutes after the opening of the financial markets on March 27, the spread between Italian BTPs and German Bunds reached 97 basis points, effectively returning to the levels of the beginning of the week. In fact, the elements that had brought the differential under control in recent days have disappeared and the result is that the yields on our country’s government bonds have gone beyond 4%.
The negotiations between Iran and the USA mentioned by US President Trump, which the markets chose to believe on Tuesday, seem less concrete than the White House wanted us to believe. The United States, meanwhile, is continuing to send troops to the Middle East and may invade Kharg Island.
The spread returns to the levels of the beginning of the week
The spread between Italian BTPs and German Bunds reached 97 basis points, returning to levels similar to those of Monday 23 March. The yields of the 10-year benchmarks reached 4.07%, while the Bunds also grew significantly, by over 15 thousandths in a single day.
The reason is the same that caused Monday’s peak, the growing instability of the Middle Eastern conflict. This week, Donald Trump’s reassurances on an ongoing negotiation had calmed the markets but, with the passage of time and the continuous postponements of the US ultimatums on an attack on Iranian energy infrastructure, the prospect of an agreement has become less credible.
Also worrying the markets is the continued increase in the concentration of troops linked to US special forces in the Middle East. Several analysts think that the US could attempt an invasion of the island of Kharg, through which 90% of the oil exported by Iran passes. A step that would represent yet another escalation in the conflict.
France is also feeling the pinch
The turbulence on the bond markets seems to only marginally affect Spanish debt. Throughout the week, the Bonos have in fact maintained a stable spread, close to 53 basis points. Even in the particularly unstable opening of Friday 27 March, Spanish government bonds held the line of growth in yields of German ones.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.10% | – |
| Italian BTPs | 4.07% | 97 |
| French Oats | 3.85% | 75 |
| Spanish bonos | 3.64% | 54 |
French debt, however, is starting to give in to pressure. Oats showed the first significant deviation of the week from their yield trend line. The spread with Bunds has in fact grown to 75, after having remained close to 70 basis points for days.
The last auction in March with yields at 4%
Today, March 27, the auctions of Italian government bonds for March end, with that of medium and long-term BTPs and CctEu.
| Typology | ISIN code | Expiration | Coupon/Yield | Max offer (mln) |
|---|---|---|---|---|
| 5 year BTP | IT0005671273 | 02/01/2031 | 2.85% | €2,500 |
| 10 year BTP | IT0005676504 | 01/01/2036 | 3.45% | €2,500 |
| CctEu | IT0005680753 | 04/15/2035 | 2.90% | €3,500 |
New monthly auctions will be held in April, with dates already announced by the Mef:
- the Bots auction will be held on April 9th;
- the auction of medium and long-term BTPs will be held on April 10;
- the auction of Btp Short and Btp€i will be held on 24 April;
- a new Bots auction will be held on April 28;
- The last auction of the month will be held on April 29th, again of medium and long-term BTPs.
